The government has adopted a panel report proposing a review of whether utilities should be split up so that electricity generation and transmission are handled by separate companies.
In the report on the key issues debated so far, the panel chaired by Minister of Economy, Trade and Industry Yukio Edano also recommends promoting the entry of new power generators and retailers into the electricity market.
The panel was set up to study how to reform the electricity system after its vulnerability was exposed by the rolling blackouts implemented last summer to deal with the shortages caused by the Fukushima nuclear crisis.
The government accepted the report at a ministerial meeting Tuesday. The panel will present its findings to another advisory panel to be created for METI. The new panel will mull detailed steps for reform next year.
Unlike utilities in many developed countries, their counterparts here conduct both power generation and retail operations as virtual monopolies in their service areas.
The utilities maintain that the system is suited to ensuring a dependable supply of electricity. But some experts have said by separating the operations of generating and distributing power, the transmission lines currently dominated by 10 utilities would be opened to other producers and suppliers and thus fair competition should be provided to industry newcomers.
The report says separating utilities' power generation segment from the transmission segment is "one way to realize the next-generation electricity supply system."
"Problems inherent in our country's electricity supply system came to the surface," the report adds, including inadequate facilities to enable regional utilities to provide power to each other when shortages occur.